From the Trading Desk
The wild start for the financial markets earlier in the week has calmed quite a bit as the week has progressed. The VIX index has move steadily lower and gold has sold off the last few days as equities have stabilized. China being off the grid overnight to celebrate its Victory national holiday certainly helped the markets consolidate. With China out, volume on the Comex exchange for December gold was light at just over 100,000 lots traded. The short term trend in gold is lower and initial support is coming in at the double bottom set last week at $1,117.50. Silver bucked gold’s price movement today and made modest gains. It ultimately failed ahead of psychological resistance at $15 and the 50 day moving average at $15.05 though.
With the move by Draghi in Europe implementing more QE, the dollar took off higher today putting more pressure on gold which was already feeling some pressure as I mentioned yesterday. You can see the spike in the dollar coinciding with the announcement by Draghi circled in red below.
You can see from the 1 month chart below just how close we are to breaking down with the price of gold.
The 2 levels to watch from this chart are $1,140 and $1,120. We break below $1,120 and then $1,110, then we have confirmed the dead cat bounce has run its course, maxing out at 7% from low to high.
What will give us some insight as to whether we will now continue down in gold is the dollar moving past 98 next on the index as seen as resistance on the chart below. In other words, it’s do or die time for gold.
No one who owns gold likes to hear we may be heading lower. Those who are waiting to buy gold or waiting to allocate more into their position in gold are happy with the fall in price. None of the above should be worried about this fall in price or the future of gold as once we do hit bottom, gold and silver both will skyrocket. We just need to be patient for this future move in the metals to occur.
The bottom line, as shown by the move by Draghi today, is central banks are not in control. They react to situations that they believe they are trying to improve but if things don’t go as planned are simply adding fuel to a burning fire where no one presently sees the smoke to ring the alarm. Believe me when I say, this writer sees the smoke, feels the heat and understands what’s really going on. This is why I am trying to finish my next book Illusions of Wealth before the bottom to get as many as I can into gold and silver.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.